The District of Minnesota recently invalidated a release of claims used by Guidant Corporation in connection with a 2004 RIF on the grounds the release did not comply with the Older Worker Benefits Protection Act (“OWBPA”). Pagliolo, et al. v. Guidant Corp., -- F. Supp. 2d -- (D. Minn. 2007), available at 2007 WL 1040869. In an opinion written by Judge Donovan Frank, the court held the release violated OWBPA by, among other things, failing to identify, as “eligibility factors” for the group termination program, the criteria by which employees were selected for termination.
OWBPA Requires Informational Disclosures For Group Terminations
Enacted in 1990, OWBPA amended the Age Discrimination in Employment Act (“ADEA”) to establish minimum statutory requirements for “knowing and voluntary” waivers of ADEA claims. See 29 U.S.C. § 626(f). An employee’s release of ADEA claims is not knowing and voluntary unless, “at minimum,” it satisfies the specific requirements enumerated in OWBPA. See id. at § 626(f)(1). Those requirements are “strict and unqualified,” and a waiver that fails to meet any of the requirements is “ineffective as a matter of law.” See Thomforde v. Int’l Bus. Machs. Corp., 406 F.3d 500, 503 (8th Cir. 2005).
OWBPA requires employers to provide informational disclosures when a waiver is requested in connection with an “exit incentive or other group termination program offered to a group or class of employees.” See id. at § 626(f)(1)(H). Those disclosures must identify, “in a manner calculated to be understood by the average individual eligible to participate” in the group termination program:
- the relevant “decisional unit” – i.e., the “class, unit, or group of individuals” from which termination decisions were made;
- any “eligibility factors” for the program;
- any time limits applicable to the program; and
- the job titles and ages of all employees in the decisional unit and whether each employee was eligible for the program – i.e., selected for termination.
See id.; see also 29 C.F.R. § 1625.22(f).
The term “eligibility factors” is not defined in OWBPA or the regulations. The regulations clarify that a group termination “program” exists “when an employer offers additional consideration for the signing of a waiver pursuant to an exit incentive or other employment termination … to two or more employees.” See 29 C.F.R. § 1625.22(f)(1)(iii)(B). In an effort to comply with the regulations, most employers have drafted their disclosures to state that the employees “eligible” for a “termination program” are those who worked in the affected decisional unit and were selected for termination.
D. Minn. Interpreted “Eligibility Factors” To Mean Selection Criteria
In Pagliolo v. Guidant, the District of Minnesota joins one other district court which has interpreted the term "eligibility factors" under the OWBPA to mean the factors by which employees were selected for termination. See Commonwealth of Mass. v. Bull HN Info. Sys., 143 F. Supp. 2d 134 (D. Mass. 2001). In 2005, the Tenth Circuit Court of Appeals, invalidated a release of claims used by the Weyerhaeuser Company because it failed to identify termination selection criteria as "eligibility factors"; however, the court omitted that holding in a later, revised opinion. See Kruchowski v. Weyerhaeuser Co., 423 F.3d 1139, amended by, 446 F.3d 1090, 1095-96 (10th Cir. 2006).
Recognizing the revised Kruchowski decision omitted eligibility factors as one of the grounds for invalidating the release, Pagliolo noted the revised opinion did not overrule Bull, and agreed with the Bull court that "eligibility factors" refers to the factors used to determine who will be terminated. Guidant witnesses testified "job performance and criticality" were the criteria used to select employees for the RIF, and the court concluded those criteria should have been disclosed as "eligibility factors." The court clarified employers need not disclose the particular reason each individual was selected for termination but must disclose the general criteria used to make selection decisions.
No Circuit Court of Appeals, other than the Tenth Circuit, has considered an employer’s obligation to disclose “eligibility factors” in its OWBPA disclosures. As one of the few cases to consider the issue, Pagliolo will likely have persuasive effect, even outside of the Eighth Circuit. As we continue to monitor the developing case law, we recommend companies using waivers in connection with group terminations consider including in their OWBPA disclosures a statement identifying the general criteria used to select employees for termination, especially for group terminations within the Eighth Circuit.
Pagliolo invalidated Guidant’s release because it did not comply with a number of other OWBPA requirements which are not detailed here. Those holdings reemphasize the need for employers to carefully review their release documents and disclosures to ensure they strictly comply with the requirements of OWBPA. Pagliolo held, for example, that Guidant’s disclosures violated OWBPA because they listed employees’ dates of birth, rather than their ages. At least in Pagliolo, where the disclosures at issue included information regarding over 8,000 employees, providing dates of birth “placed an unreasonable burden on the employee to compute each birth date to age.”
Pagliolo also invalidated the release because the disclosures did not properly identify the decisional units of affected employees. Though the RIF was nationwide in scope, termination decisions were made at the local level. The court concluded the decisional units should have been limited to the facilities at which terminated employees worked. Employers should take care to examine their decision-making processes when crafting OWBPA disclosures. Depending on how termination decisions are made, a single RIF may affect multiple decisional units, each requiring its own set of disclosures. The regulations emphasize that decisional units must be determined on a case-by-case basis. Though Pagliolo suggests decisional units will rarely (if ever) be broader than a single facility, we recommend employers continue to identify decisional units based on their actual decision-making processes.
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